Maybe I just don’t understand what they’re doing. BUt it seems to me if I take out a 10 year policy that costs $100 per month, I’m betting that I’m going to die within that period of time and the company is betting that I won’t or that they won’t have to pay out. If I get to the end of that 10 year term, then I’m just out $12,000. What am I missing?
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It’s exactly like car insurance. You pay for a month, three months, six months, whatever, and if the giant bad thing happens (death/accident) you have financial protection. If the bad thing does not happen you are out the money. You are trading a small bad thing (the premium) to reduce the severity of an unlikely big bad thing.
The reason the policy has a 10 year term is that they are promising not to raise the premium for that period. Your car insurance company will not do that. Get the life insurance policy, then get diagnosed with diabetes, your premium stays the same until the term is up. Get a car insurance policy, get six speeding tickets, up goes your premium. That’s the only real meaning of the term part of the policy.
Because of laws and regulations of boundless complexity there are all kinds of life insurance policies with all kinds of features attached. Sometimes they are a very good way to handle your money, sometimes not. Talk to a professional.
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